Due to declining milk production in 2006, the dairy industry particularly in demand for products like non-fat dry milk, experienced rapid increases in prices as supply for some raw ingredients failed to meet demand.

Though the report stressed that milk production would still fail to catch up with the capacity reached in 2005, it added that most dairy segments would gradually benefit from improving supply. This increased production was attributed in part to a second 0.5 per cent rise in the bloc's quotas levels.

Of these segments, cheese production, which for sometime has been a favored target for milk producers due to greater profitability, will benefit most from the increased milk supply in the bloc.

This had been driven by increased demand in both domestic markets like Germany and Italy, and outside of the EU by increased consumption in Russia.

Source: foodproductiondaily.com